Bush's tax and savings goals

Budget speech echoes campaign trail promises

WASHINGTON (CBS.MW) -- President George W. Bush stuck close to his campaign statements when presenting his $1.6 trillion tax cut package and other proposals affecting Americans' personal finances in his first major speech to Congress.

"If this bill doesn't fly, then I think he's in trouble with the other things he wants."
Fred Rumack,Buck Consultants

Addressing a joint session Tuesday night, Bush outlined an ambitious plan to increase federal spending on education, while cutting taxes across the board. Without providing many details, he said he wants to reduce income tax rates to 10, 15, 25, and 33 percent; add a refundable tax credit to encourage uninsured Americans to buy their own health insurance; and double the child tax credit to $1,000 from $500 a year.

In a week where the Nasdaq sunk to a two-year low and the Federal Reserve considered further interest rate cuts, Bush pushed the case for a big tax cut, saying, "Tax relief is right and tax relief is urgent."

He also proposed to overhaul Medicare and Social Security, suggesting that workers be allowed to invest part of their public benefit in private funds. Other priorities he mentioned included reducing the marriage penalty and eliminating the estate tax, and he endorsed third-party reviews for individual health-care grievances as an alternative to lawsuits.

With an almost-evenly split House and Senate, the odds of passing any of his proposals may depend on how lawmakers vote on the tax cut, said Fred Rumack, director of tax and legal services for Buck Consultants in New York. "If this bill doesn't fly, then I think he's in trouble with the other things he wants."

Medical choice

Bush said he wanted to increase access to health care by providing a refundable tax credit to help uninsured workers afford their own health insurance.

"You get this back whether you pay any taxes or not."
Thomas Saving,Texas A&amp;M

"This is a move in the direction of trying to level the buying field or playing field for the health insurance market," said Thomas Saving, an economics professor at Texas A&M University.

If the tax credit passes, it would function like a voucher and suppliers would compete for individuals' health-care money, Saving said. Yet he said opening competition likely would lead more employers to stop offering health-care packages.

"They might just give you a cafeteria choice and say 'Here's $500 a month. Choose how you want to spend it,'" Saving said. "You don't get to keep what you don't spend on health insurance, but you get to go out and decide where the $500 goes."

Making the credit refundable means low-income earners who don't pay taxes would receive equal benefits. "You get this back whether you pay any taxes or not."

Bush hasn't placed a dollar value on the proposed refundable tax credit yet, but it has a good chance of receiving bipartisan support, Saving said.

While Bush said he wanted to add prescription drug coverage to Medicare for low-income seniors, he may have to expand subsidies to all retirees to please Democrats, Rumack said.

Independent review and Social Security

In his speech, Bush clarified his proposal to privatize part of younger workers' Social Security benefits, giving it a better chance of success, Rumack said. "It's the first time people heard it's not going to affect older workers and people who don't want it."

"It sounds like he supports an independent review before going to court."
Julia Bellinger,Society for Human Resource Management

Younger workers who have a long time to ride the market's ups and downs stand to gain if the proposal goes through, said Julia Bellinger, a lobbyist for the Society for Human Resource Management.

"If they were allowed to put just a small amount of their Social Security in the stock market, they'd have greater control of their money and a greater return on investment."

Bush also talked about establishing a patient's bill of rights that discourages "frivolous lawsuits" by creating an independent review process. SHRM hopes Congress and the President reject employer liability in health-care reform, Bellinger said.

"It sounds like he supports independent review before going to court," she said. "We'd very much like that to happen because going to court shouldn't be the first way to solve problems."

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